BoE hints at further interest rate spikes

Cunliffe emphasised the BoE would behave “forcefully” to ensure higher inflation through domestic pressures and global energy prices does not become “the new normal” for the UK economy.

“It’s our job to make sure that as this inflationary shock passes through the economy we don’t find that leaves us with inflation being the new normal, the sort of embedded psychology,” he told the BBC.

“People can have confidence that we will act to make sure that that doesn’t happen,” he said.

Inflation hit a 40-year high of 9.1% in May 2022, and it is widely expected to exceed double digits in the autumn.

The BoE’s target inflation rate is two percent, and it has raised interest rates five times since December 2021 in a desperate attempt to wrest control of inflation.

Cunliffe said a slowdown in consumer spending was already impacting the wider economy.

“What we expect is that the cost-of-living squeeze will actually hit people’s spending and that will start to cool the economy, and we can see signs that the economy is already slowing,” he commented.

“We’ve increased rates at every meeting for the last five meetings. I don’t think that has ever happened actually before in the history of the MPC,” Cunliffe said.